Adviser Opportunity in Educating the Plan Committee

The adviser is a key player in providing ongoing education to retirement
plan committee members.

“Education for
the committee is one of the major services an adviser provides,” says Steve
Bogner, managing director of HighTower at Treasury Partners. “The adviser
should be able to come in and address the major areas: risk, the employee
experience, the cost of the funds and of the platform,” he tells PLANADVISER. “The
committee members need this information to make sure they fulfill their
fiduciary responsibility.”

As retirement plans increasingly use plan advisers—north of 85% of plan
sponsors use one for help with the overall plan, says Jordan Burgess, senior
vice president of specialty field sales at Fidelity Advisor Solutions—they
benefit from the insights an adviser can share with the committee.

Typically, says Bill McClain, senior defined contribution (DC)
consultant with Mercer, plan committee members need updates on judicial,
regulatory and legislative issues, in addition to updates on general retirement planning trends. “There’s so
much happening in the DC world, it’s difficult for a committee member to keep
up with everything going on without support,” he tells PLANADVISER.

From the adviser’s standpoint, McClain says, the regulations
that influence DC plans are an important subject to bring before committee
members on a regular basis. Regulatory changes in the retirement space are often complex and nuanced, he warns: “You need to be able to
understand how a given regulatory change applies to the particular situation, and how it has practical
grounding for the client,” he says. “How does it apply to the committee members?” A skilled adviser should be able to answer this question clearly and directly.

Plan committee members’ backgrounds run the gamut, from finance to HR to
legal to those from the corporate side, McClain says. “A well-structured
committee should be diverse and provide opportunities for sharing different
perspectives.”

NEXT: Committees need a free
exchange of ideas and opinions.

The diverse backgrounds of committee members will have a big impact on the way a given committee does business, McClain says. “Sometimes you see situations where
everybody waits for one person to conduct the committee, and everyone follows
that person,” he says. “For fiduciary decisions, you want a free exchange of
ideas and consensus.” The ideal committee environment creates an opportunity
for people to share and help other committee members learn from their peers.

A finance person, for instance, who is not as up to speed on the Employee
Retirement Income Security Act (ERISA) can hear the opinions and insights of
someone in HR. McClain notes that when it comes time to select a managed account
provider—in many cases, the choice is dependent on the recordkeeper of the plan—the
finance person might choose the provider with the lowest cost. The HR person
may understand that choosing this provider carries a lot of fiduciary responsibility,
because it affects the investment options for participants. The HR person might
be more attuned to the sales techniques of the provider than the finance
representative.

Cost used to
be the top concern, Burgess tells PLANADVISER, but now, the No. 1 issue is preparing
participants for retirement. “About 30% of plan sponsors name that as their top
concern,” he says. “That leads the best advisers to focus on plan performance,
outcomes and participation rates, and they can provide suggestions that improve
performance and make sure the plan has a prudent process to select investments.”

“With the
recent Supreme Court decision [in Tibble vs. Edison], DC committees need to make platform costs a big
focus,” Bogner says. “Committee members will want to make sure that the overall
platform costs are in line with the industry.”

NEXT: Focus on the topics that support the
goals of the plan.

Employee
education should be a very big focus, Bogner says, since it ties into the participant
experience and ultimately can affect plan outcomes and retirement readiness. “Is
the plan providing enough ways to educate them so they put enough money into
the plan and increase on a regular basis?” he asks.

Advisers can
use their expertise for plan aspects the committee is considering, McClain
says. Perhaps the committee is mulling a brokerage window for the plan. Committee
members can benefit from a walk through the typical considerations, pro and
con, and a member who is more focused on the regulatory side can bring the
committee up to date on the Department of Labor’s (DOL) scrutiny on brokerage windows.

Bogner suggests
platform costs and a highly detailed overview of plan costs as two more topics
for the committee to tackle. How to align corporate and fiduciary interests is
a topic, he says, but not a particularly thorny one. “There’s been a lot of
consolidation in plan providers,” he says. “You don’t have to sacrifice service
to reduce costs. Many large plan providers are super competitive, and you can
get a very good one at a reasonable cost.”

The committee can
also examine various areas of risk: what it means to be a plan fiduciary; what
risks are involved; the importance of choosing the right platform and the right
adviser. Once the committee is built, how to take minutes, establish and review
an investment policy statement and an education policy.

Anyone
supporting the committee members should understand the issues that matter to
them, McClain says, and filter for what is important. “You might think there
are things they don’t need to know, but at the same time, most committees are
strapped for time,” he points out. “It’s a delicate dance between what’s
important but making sure you’re not leaving out information they need.”